A controversial proposal for a floating hotel on Oamaru Harbour has been scuppered.

Last year, the community-owned Oamaru Licensing Trust unveiled a proposal for Oamaru's harbour which included the addition of a multimillion-dollar floating luxury hotel.

The licencing trust had earlier been approached by a developer, who planned to moor a three-level, twenty-five-room hotel near the waterfront.

Christchurch architects helped design concept plans for the hotel.

However, the licencing trust says the developer will no longer back the project.

The proposed hotel had always been controversial, with some applauding the trust's vision, and others criticising the impact on the harbour.